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U.S. hedge fund steps up bid to reinstate ousted Gildan CEO, bring in new directors

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Then-CEO Gildan Activewear Glenn Chamandy at a news conference following the apparel manufacturer’s annual meeting on Feb 5, 2015, in Montreal.Paul Chiasson/The Canadian Press

U.S. hedge fund Browning West is cranking up its bid to reinstate Gildan Activewear Inc.’s ousted chief executive and bring in new directors to support him, demanding now that almost the entirety of the clothing maker’s existing board be swapped out.

Los Angeles-based Browning West said Tuesday that it has filed a formal request with Gildan to hold a special shareholders meeting without delay and reconstitute the board. It wants Glenn Chamandy rehired as CEO and eight of the directors on Gildan’s current 11-member board removed and replaced with new directors, saying the existing board is “far more entrenched” than it thought.

“It is critical that the board hold the special meeting expeditiously, because with each passing day the current state of uncertainty is risking permanent damage to Gildan stakeholders,” Browning West founders Usman Nabi and Peter Lee said in a letter to shareholders. Since Mr. Chamandy’s termination, Gildan’s stock has underperformed the most relevant index by 20 per cent, meaning each of the company’s board members is already responsible for more than US$1.2-billion of value destruction, they said.

Opinion: Gildan board wants last laugh in CEO showdown

Browning’s request further heats up an already intense conflict between Gildan’s board, which insists it had ample reason to let Mr. Chamandy go, and several big investors, who want him reinstated. The clash has taken on a personal tone, with directors attacking the former CEO for lacking commitment to his job and accusing him of questionable behaviour around the time he left, such as deleting messages on corporate-issued devices.

Browning West was previously pushing for five new candidates on Gildan’s board. It has now expanded that to eight, underscoring what it characterizes as an urgent need to clean house. The firm says it learned that Gildan’s board intends to postpone the company’s next annual meeting and any special meeting requisitioned to as late as the fall, and the board plans to launch “baseless” legal manoeuvres against shareholders.

“These disappointing tactics are designed to divert focus from substantive issues while imposing significant costs and hurdles on concerned shareholders so they abandon their campaigns to protect shareholder value,” the Browning West founders wrote. “We are not deterred by such tactics and will continue to exert our rights and hold the board accountable for its failures.”

Gildan spokesman Simon Beauchemin said the company has received the meeting request and will respond once it has been reviewed. “The board of directors continues to view the efforts of Browning West and Mr. Chamandy as baseless, public misinformation tactics,” he said, adding that the board is independently reviewing Mr. Chamandy’s engagement with certain shareholders prior to his termination.

The Montreal apparel maker stunned investors when it announced Dec. 11 that it had dismissed Mr. Chamandy after a 40-year tenure at the company, the past 20 years as CEO. It named former Fruit of the Loom executive Vince Tyra as his replacement. The sacking has triggered a power struggle between the board and several investors, who say the CEO’s exit was unwarranted and Mr. Tyra is not qualified to take his place.

Browning West and eight other investors, who hold a combined 35 per cent of Gildan’s shares, have voiced concern over the board’s actions and called on directors to reverse course, according to the hedge fund. They include Montreal-based investment management firm Jarislowsky Fraser, Winnipeg’s Cardinal Capital Management and hedge fund Anson Funds. Browning holds a roughly 5 per cent stake in Gildan.

Anson Funds said Tuesday it supports Browning West’s expanded slate of director nominees and still wants Mr. Chamandy reinstated. “We believe the Gildan board has overseen unnecessary value destruction and requires significant change,” Moez Kassam, Anson Funds’ chief investment officer, said by e-mail.

Jarislowsky Fraser, Gildan’s biggest shareholder, also supports the expanded Browning West slate, company spokeswoman Quyn Pham said via email late Tuesday. Another major shareholder, London-based Janus Henderson, backs the expanded slate as well, according to information obtained by The Globe and Mail.

Browning West’s proposed board slate includes its co-founder, Peter Lee, along with former United Rentals Inc. CEO Michael Kneeland, former Nike Inc. chief risk officer Michener Chandlee and Karen Stuckley, a former senior vice-president at Walmart Inc. There are also three Canadians among the nominees in addition to Mr. Chamandy: Ghislain Houle, the current chief financial officer of Canadian National Railway Co.; Mélanie Kau, former lead independent director of convenience store giant Alimentation Couche-Tard; and J.P. Towner, a former chief financial officer of Dollarama Inc. who now works for Rona Inc.

In their own letter to shareholders on Monday, Gildan directors stood firm in their decision to sack Mr. Chamandy, saying that in recent years he had become an ineffective leader who was barely in the office as he became increasingly focused on the development of a golf course in Barbados and other “personal pursuits.”

“The board is unanimous in its conviction that retaining Mr. Chamandy as CEO would have jeopardized the future of Gildan and destroyed shareholder value,” their letter said. “It became clear that he had no credible long-term strategy and no vision.”

Jarislowsky Fraser and other investors have said Mr. Chamandy and his leadership team have been astute allocators of capital for decades and that he remains the best person to lead the company. Directors counter that he’d been underperforming for some time and became more detached from the business in recent years.

Gildan directors say Mr. Chamandy agreed to an orderly three-year succession plan in December, 2021, but that by the fall of 2023, he moved to entrench himself as CEO. They say he presented them with a strategic plan this past October to make several risky and highly dilutive multibillion-dollar takeovers and saying he would need to stay on as CEO to oversee the integration.

The board was “dubious about these high-risk acquisitions, particularly in light of Mr. Chamandy’s inability to answer even the most basic questions about his strategic proposal,” the directors say. They say they asked him to provide a thorough analysis of the plan and instead he gave them an ultimatum: Either support his strategy and his leadership or he would immediately leave and sell his stock.

The ultimatum ruptured the trust that was already fraying between the board and the CEO, and he was let go last month, according to the directors’ version of events. Mr. Chamandy denies issuing any such demand.

On Tuesday, the former CEO fired back at the board that sacked him. But he did not address the specific criticisms of his performance or his alleged actions around the time he was let go.

“I take great offence at what appears to be a premeditated effort to publicly undermine my record,” Mr. Chamandy said in a statement. “The board’s self-serving motives, designed to distract from its own recklessness, have led them to lose sight of what is truly important – the best interests of the company, along with its employees, customers and shareholders.”

Gildan’s stock has tumbled about 16 per cent since the company announced Mr. Chamandy’s exit. It fell again Tuesday morning on the Toronto Stock Exchange, before closing at $42.12, up just five cents for the day.

Editor’s note: A previous version of this article incorrectly stated that Cardinal Capital Management is based in Toronto. Its headquarters are in Winnipeg. This version has been updated.

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